Answer:
Cash position reduces by -$24,760
Explanation:
If Gatehouse sales increases as expected the increase will be
1,710,000 - 1,510,000 = $200,000
Net assets is expected to represent 50% of sales, so this sales increase is expected to have Asset Buildup of:
0.50 * 200,000 = $100,000
Asset has a negative balance so it is -$100,000
Return on sales is 8% of the new sales value:
0.080 * 1,710,000 = $136,800 (profit)
45% of profit is paid out as dividend
0.45 * 136,800= -$61,560
It is negative as it represents cash going out
Total cash position = -100,000 + 136,800 - 61,560
Total cash position = -$24,760
Cash position reduces by -$24,760
